Deductibility of Interest on Income-tax

Dear Dharmaraju,

Pls refer this link -

/forum/interest-on-delayed-tds-amount-can-allowable--75191.asp

Thank you very much Amir ......

Any Inputs on the third query?

U r welcome friend......

Regarding Third Query -

Sec 58(1)(a) -

in the case of any assessee,—

       (i)  any personal expenses of the assessee ;

Sec 58(1A)

The provisions of sub-clause (iia) of clause (a) of section 40 shall, so far as may be, apply in computing the income chargeable under the head “Income from other sources” as they apply in computing the income chargeable under the head “Profits and gains of business or profession”.]

Thanks again....

Normally we relate the term `personal expenses` to an individual.  In case of firm/company, if the payment does not pertain to its partner, director, it is not assumed to be a personal expenditure. 

Section 40(a)(iia) referred to in Section 58(1A) speaks of disallowance in respect of Wealth Tax and not Income tax...

  ok I got it???

Wat is allowed as deduction from "IOS" is -

 any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income. {ASper Sec 57(iii)}

Now I want u to answer whether Income Tax can be said as an expenditure incurred wholly & exclusively for the purpose of earning such income??

See ya............:)

Originally posted by : Amir
	Dear Dharmaraju, Pls refer this link - /forum/interest-on-delayed-tds-amount-can-allowable--75191.asp

So, the crux is interest on late payment of TDS is not allowed.

Very well asked....

I went through some of the case laws defining wholly, exclusively.... and I could find the following;

n The words ‘wholly and exclusively’ pointedly signify that the expenditure should be completely devoted to the business. It need not be essential, necessary or compelling ; it may be optional and purely voluntary. But it must be commercially expedient and should have the aim of the continuance and furtherance of the business and an eventual augmentation or stabilisation of profits. - Sree Meenakshi Mills Ltd. v. CIT [1963] 49 ITR 156 (Mad.).

Section 37 provides that all other expenditure is allowable if if is incurred wholly & Exclusively for business.  Inspite of this, non-deductibility of income tax was provided separately in Section 40(a)(ii). Hence, a doubt arose in my mind regarding allowability of tax in case of IFOS.

On your reproducing the provision, I could note the difference.  Section 37 talks of business whereas Section 57 states that it should be for the purpose of earning income.

Now I am convinced regarding the query posted by me.

Thanks a ton Amir.... 

Regards

Dharmaraju